TCS Daily

Debts, Moral and Financial

One particular issue poses an obstacle to economic recovery in Iraq:
the debts that the country has outstanding to France, Germany and
Russia. Much of that debt stemmed from Iraq's purchase of weapons from
those countries. Little to no part of the debt stemmed from the desire
of Saddam's regime to help the Iraqi people in any tangible way.
Instead, Saddam piled on debt in order to furnish his military with
weapons, while allowing his potentially rich people to languish in
squalor and poverty. Now with Saddam's regime out of the picture in all
but name, a new Iraqi government will have to contend with the debt
Saddam's regime left behind.

There is, however, a doctrine that has gained some acceptance in
international law that might be able to help Iraq solve its debt
problems. This is the "doctrine of odious debts." As Michael Kremer and
Seema Jayachandran tell us,
the doctrine was developed at the end of the Spanish-American War in
1898. At that time, the United States argued that neither America, nor
Cuba should be responsible for the debt to Spain incurred without the
consent of the Cuban people, especially because that debt financing did
nothing to augment the lives of the Cuban people. Spain never
officially accepted this argument, but it did take responsibility for
the debt as part of the terms of the Paris Peace Treaty. Blogger and
TCS contributor Joe Katzman points out
a deliciously ironic aspect of the doctrine of odious debts, given that
part of the Iraqi debt is owed to France-it was a French international
lawyer, Alexandre N. Sack, who formalized the doctrine of odious debts
after World War I.

The debt owed to France, Russia and Germany is completely at odds
with any sense of fair play and justice. It shocks the conscience to
think that a democratically elected Iraqi government and a freed Iraqi
people would somehow be forced to pay for the military spending spree
indulged of Saddam Hussein. It was bad enough that the Iraqi people had
to suffer through Saddam's rule while he was in power. It would be even
worse if they have to suffer aftereffects of his rule now that he is
gone-aftereffects that could potentially be avoided altogether.

The fact that France, Germany and Russia opposed military action to
rid Iraq of Saddam's regime should also play a part in deciding what
should be done about Iraq's debt. It is likely that much of the
opposition to the war evinced by the three countries was due to their
fear that a post-Saddam government would not honor the previous
government's debts to those countries. As such, the three countries
opposed a military action that has brought about the liberation of the
Iraqi people in order to ensure that Iraq-under Saddam's regime-would
feel bound to pay its debts to them. Again, one's sense of fair play
and justice is offended by these circumstances. France, Germany and
Russia pursued policies that would have kept a brutal dictator and his
regime in power even today-just so that they could collect on a debt
incurred by that dictator, without the consent of his people. Why
should the three countries be allowed to profit and be rewarded by that
policy?

Realpolitik could also justify enacting the doctrine of odious
debts in the present circumstance. Continued attempt by the French,
Germans, and Russians to frustrate the policy goals of the United
States and Great Britain-policy goals that helped bring about the
liberation of the Iraqi people-should not be forgotten. Until a
provisional Iraqi government is set up, and even during the
administration of that government, the U.S. and Great Britain will have
a substantial say in the reshaping of post-Saddam Iraq. They should use
that authority to make clear to France, Germany and Russia that they
cannot expect to profit from their opposition to American and British
policy regarding Iraq.

The doctrine of odious debts should prevent the debts incurred by
the regime of Saddam Hussein from being honored. Those debts were
incurred without the consent of the Iraqi people, and the debt
financing was primarily and overwhelmingly for the purpose of the
aggrandizement of Saddam's regime. It did nothing to help the Iraqi
people. The French, the Germans and the Russians also did nothing to
help the Iraqi people by opposing the very policies that brought about
their liberation. The only thing the French, Germans and Russians did
do was to try to block the goals of the liberators of the Iraqi
people-the United States and Great Britain. Now that those liberators
are in a position to substantially influence the shape of post-Saddam
Iraq, they should remember that the only valid debt owed is not the
financial one to the French, the Germans or the Russians. Rather, it is
a moral debt to the Iraqi people to see to it that their society, their
system of government, and yes, their economy, is rebuilt as quickly and
comprehensively as possible.